Hello, and welcome to the NX Filtration H1 2024 call. Please note, this call is being recorded and for the duration of the call, your lines will be on listen only. However, you will have the opportunity to ask questions at the end of the call. This can be done by pressing star one on your telephone keypad. If you require assistance at any point, please press star zero and you will be connected to an operator. I will now hand you over to your host, Michiel Staatsen, COO, to begin today's conference. Please go ahead, sir.
Thank you very much, and thank you everybody, for joining this webcast for the first half of 2024 results from NX Filtration. And in the call, next to me, we also have present our founder and CTO, Erik Roesink.
Morning.
And our CFO, Jan Feie Zweers.
Good morning as well.
We'll present our key highlights, our strategic progress, and the half year 2024 financials and outlook. But before that, I would like to point out the picture on this slide. Here you see what the business of NX Filtration is all about. This is the fourth water treatment plant installed in Indonesia with our unique nanofiltration membrane technology inside. This is in Medan, Sumatra, and it produces potable water from a polluted river, with minimal energy consumption and without chemical dosing. Now to the highlights of the first half of the year. Our revenues came in at 5.9 million EUR, and this is up 57% compared to the first half of 2023. This growth was driven by repeat projects with existing clients and successful onboarding of various new OEMs.
Not only we received our largest order to date for the largest hollow fiber nanofiltration membrane water treatment plant in Mexico, for a very important application in the water transition, namely water reuse for potable water. But also, we saw that the value of our technology is reflected in a continued strong gross margin of 59.1%. All in all, resulting in strong ESG impact by enabling clean water while avoiding 304,145 tons of CO2 emissions. Furthermore, we successfully secured funding through a combined debt and equity package of approximately EUR 50 million, and we successfully started up our new factory in Hengelo. Based on our increasing traction in the market and the progress we are making with our customers, we reconfirm our outlook of total revenues for 2024 in excess of EUR 16 million.
Last but not least, we welcome our new CEO, Floris Jan Cuypers, for September first, and Jan Feie Zweers, as our new CFO, who started earlier this month. We grew both our business lines in clean municipal water and sustainable industrial water. In the municipal business line, we're offering water companies a sustainable solution to remove micropollutants such as PFAS, chemicals, and medicine residues from polluted water sources. And not only did we realize a 90% year-on-year growth, but also we showed a strong step up in project size, and we onboarded several new OEMs in Asia while continuing strong progress with several key OEMs in Europe, such as Veolia, Aqualia, and Nijhuis Saur Industries. And we are particularly proud of the water reuse project in Zapopan, Mexico.
Not only will this be the largest hollow fiber nanofiltration membrane system in the world, the application is water reuse for drinking water in a region that suffers from severe droughts during the summer. A very important application in the water transition. And in the industrial business line, we enable sustainable water treatment for process water and water reuse, and showed 42% year-on-year growth. We received initial large orders from Indian multinational engineering company, Thermax, and in food and beverage, we continued our work with PepsiCo, to whom we have now supplied nanofiltration membranes in three continents. And we launched a new sustainable beer filtration solution in collaboration with Bucher Denwel, for which they started commercialization this year. Our other income increased to EUR 424,000, mainly driven by an increase from pilot rental income. And now to our global...
To our true global footprint. As you can see here, we are represented in Southeast Asia, the Middle East, Belgium, France, Spain, South Africa, Turkey, and we have our own sales offices in the U.S., China, and India. With this strong global and local presence, we can give effective support to our customers in their search for sustainable water treatment solutions. In the graph, we show the revenue split to geographies, with roughly 1/3 in each of the three continents, the Americas, Asia, and Europe, and furthermore, we started another 104 pilots in the first half of 2024. We sold modules to five full-scale projects, larger in size again, and including two repeat orders, but also received two replacement orders related to projects we supplied in the past, and this is an essential part of our rollout and growth strategy.
We see all of this as a great testimony for the success of our technology and confirmation that the drivers to implement real solutions are getting stronger across the world. That we are successfully in demonstrating the power of our technology through our commercial rollout model across markets and across geographies. And now I would like to hand over to Erik.
Thank you, Michiel, and I'm very happy to continue here. Let me start here by reminding you that NX Filtration has a very clear mission, and that is to supply clean and affordable water to a global market. Our IPO in 2021 was the first Dark Green IPO worldwide. 95% of our business was labeled dark green, which was based on our innovative, sustainable hollow fiber nanofiltration membrane technology, that produces clean water on the most energy-friendly way. Further, we have set our science-based CO2 reduction targets, and here, NX Filtration aims for 42% reduction in Scope 1 and 2 emissions by 2030. And we, as NX Filtration, are extremely proud to be the only listed company in Amsterdam that is now B Corp certified, underlining our very strong ESG profile. And here, it's about making real impact.
I'm very proud of the achievements of our team over the first half year of 2024. This is exactly why I have founded NX Filtration in 2016 , and now already this very positive global impact and contributing so strongly to the global water transition. Already in 26 countries, we are producing high quality water from river water or from industrial or municipal wastewater. We all globally see the dramatic effects of the global water crisis caused by climate change. Our rivers are drying up, groundwater levels are lower than ever before, and that means that we need to hurry up with the water transition. Water transition is dealing with water scarcity and water pollution, and it forces us to fully focus on water reuse and also on the use of other water sources than groundwater, like wastewater and if available, surface water.
Next to a water crisis, we do have an energy crisis. To minimize the CO2 footprint, we do need green, energy-friendly technology, and that is exactly what NX Filtration offers its customers. With our membrane module sales in 2024, until now, we could produce 243 billion liters of water, which saves 72 GWh on energy, 5.9 million kg of chemicals, and more than 3,000 tons of CO2, compared to existing traditional water technology. Let's now make the step to our strategic progress. Early this year, I was awarded by American Membrane Technology Association, AMTA, for my, or better, our contribution with membrane technology in clean water solutions, underpinning that our hollow fiber nanofiltration technology is worldwide recognized as breakthrough technology and a perfect tool in the water transition.
As mentioned, the water transition is about water scarcity and water pollution, and that is still our key driver in the water markets. This is meanwhile, on almost all political agendas, and is focusing on protecting water bodies for further pollution, as you can see, for example, in very strict regulation for PFAS coming up. But it's also stimulating and enabling water reuse of biologically treated municipal wastewater. This is, in our opinion, a very important new source for our high, high quality water, even for drinking water, potable water, and as explained already by Michiel, in Mexico, SAPAL, our nanofiltration technology will be applied later this year for a potable water reuse application. From here, I'd like to go back to Michiel for explaining our results with our pilot program.
Thank you, Erik. As you know, we take our customers through the technology adoption phase by demonstrating the power of our technology through pilots and pilot projects. On the left, we see the number of pilot projects initiated over the years. We started 104 new pilot project trajectories this year, planting the seeds for further growth, both in the industrial and municipal markets, and consisting of small Mexplorer and larger Mexpert-based pilots. We believe this is a sustainable level from which we can focus both on the success rate of the pilots and converting those to orders for full-scale projects. On the chart on the right, we see the development of our pilot fleet in time.
And as you know, we have a pilot fleet, varying from the small scale, Mexplorer pilots and larger scale, Mexpert pilots, up to for the technology acceptance phase, and the larger pilots, the Mexpert pilots, for the proof of concept. And these pilots not only provide water quality parameters, but also provide valuable insights on the energy use and chemical consumption, valuable inputs for the next phase, engineering and design of a full-scale system. And these pilots are being deployed all over the world, and will remain. We will remain focused on the effective deployment of the pilot fleet together with our customers. We believe we are well equipped with this pilot fleet to address our pilot needs going forward, especially because our repeat customers are slowly taking over piloting from us, with their own pilot systems.
And because we expect to benefit more and more from learnings from the past, from conducted pilots and from the data generated by these pilots and running full scale projects, we are feeding our and developing our proprietary online prediction tool, which will result in shorter and even no piloting in sweet spot applications. And switching to Slide 11. We are very proud about successfully starting our new factory, in which we have added another 50,000 modules per year capacity, and created space and infrastructure to expand to more than 120,000 modules per year in the future. We have finalized the construction in time and within the CapEx budget, and we have successfully started up membrane spinning, module production, and our in-house water treatment based on polluted surface water.
With extensive reuse of energy, with heat recovery systems, solar panels on the roof, and a novel heat exchange with a neighboring data center, our advanced setup will lead to significantly improved energy footprint. We have already moved out our entire module production operations to Hengelo. In the coming months, we plan to start moving our former membrane production lines from our previous location, Enschede, to Hengelo also. Now I would like to hand over to Jan Feie.
Thank you, Michiel. I'm honored to have recently joined NX Filtration as the Chief Financial Officer. The company's mission of clean and affordable water for all resonates deeply with my personal beliefs and values. I'm highly committed to contribute to this important cause. I look forward to build on the strong foundation that has already been established, and work closely with the entire organization to ensure we deliver on our strategy. I'm also eager to build strong relationships with you, investors, analysts, and all other stakeholders. Your trust is paramount. In the next two slides, I will take you through the financials of the first half year 2024. I will start with the summary of the profit and loss. Total revenue grew by 57%, from EUR 3.7 in the first half year of 2023 to EUR 5.9 in the first half year of 2024.
This was driven by successful conversion of pilots into large, full-scale projects, repeat projects with existing clients, and successful onboarding of various new OEMs across all regions. The gross margin remains strong, with 59.1% in the first half year of 2024, compared to 58.9% in the first half year of 2023, reflecting our strong technology position. The EBITDA loss was 6.4 in the first half year of 2024, compared to a loss of 5.3 in the first half year of 2023. The EBITDA loss is mainly driven by investing in the organization ahead of the curve to facilitate future business. The total FTE increased from 159 in June last year to 166 in June this year. Now I will move to the balance sheet.
CapEx amounted to EUR 18.6 million, compared to EUR 12.9 million in the first half year of 2023. CapEx mostly relates to the construction of our new factory. Additionally, NX Filtration capitalized EUR 0.6 million of development costs, which demonstrates our continued efforts to invest in innovation for the future. The working capital increased to EUR 15.4 million, as per June 30, 2024, versus EUR 9 million last year. The December working capital balance was positively impacted by a significant amount of CapEx invoices outstanding, related to the construction of the new production plant, which invoices have been paid in the first half year of 2024. Our cash position at June 30, 2024, amounted to EUR 69 million, compared to a cash position of EUR 50 million at December last year.
The cash position was positively influenced by NX Filtration, newly secured combined equity and debt package of approximately EUR 50 million in March 2024. This providing sufficient headroom to fund our growth ambition well into the future. The final part of the webcast will be presented by Michiel.
Thank you, Jan Feie. Sustaining and accelerating adoption of our technology to our commercial rollout strategy remains our top priority. We will further intensify our existing approach in working with OEM partners to roll out pilot projects and convert these pilots into demo and full-scale projects. We'll focus on realizing more and larger repeat projects with these OEMs, and therewith, expanding our installed base for future replacement sales. Concerning our new factory, after the successful startup of our new factory, we will continue to move all our existing operations into this new facility to enable further efficiencies. The additional capacity from our new factory will enable us to supply larger projects from our growing overall pipeline of opportunities for the medium term.
Together with our new CEO, Floris Jan Cuypers, for September first, and our new CFO, Jan Feie Zweers, Erik and I are fully committed to keep increasing our impact based on our mission: clean and affordable water for all. We see a continuation of our growth in the second half of 2024, and therewith, we reconfirm our outlook of total revenues for 2024 in excess of EUR 16 million. After the full year 2024 results, we will host a capital markets day, in which we will look forward to talk with you through the highlights of our industry and updates on our business. Herewith, I would like to hand back to the moderator for the Q&A.
Thank you. If you would like to ask a question, please press star one on your telephone keypad. To withdraw your question, please press star two. We'll pause for just a moment to allow everyone an opportunity to signal for a question. We will take our first questions from Thomas Martin, from BNP Paribas Exane. Your line is open. Please go ahead.
Hi, guys. Just firstly, you've previously, you know, spoken about the timings around project conversion, noting that they had previously extended. You've obviously delivered, you know, good numbers in the first half and reiterated the guidance for this year, so everything seems to be going well now. Can you give us any insight as to whether or not these project timings are now stabilizing in terms of, you know, the timing from perhaps pilot through to eventual contract award? And is there any sign of that perhaps reversing in any areas as your technology becomes better understood by customers? Thanks.
Yeah, thank you, Thomas, for your question. Yeah, so as we talked about in the past already, there is of course a difference in pilot timing for pilot trajectories with municipal projects and industrial projects, where the industrial turnaround time is a bit shorter, and I think it's a very important step we showed in the first half of this year, that we are also showing now bigger projects in the municipal space, in Asia, especially, and in Mexico. And this is based on after these pilot trajectories, and our customers have done their first projects, they're coming back with repeat projects, and these are often bigger in size. So all in all, that's gonna shorten this period from pilots to full-scale project delivery. Yeah, so we're very positive on that.
Can I ask you another couple? Just in terms of the pilot systems in operation at your OEM partners, can you give us an idea of the rough numbers there? Just trying to understand the relative contribution versus the 190 systems that you operate.
If I understand your question, right, so we started another 100 pilots in the first half of this year. And last year we showed overall a little bit of more than 200 pilots that we started. But what we also see next to our own pilots, where we're deploying our own pilot systems and running them with our own application engineers, we also see a trend that our customers are taking over this role. They're building their own pilots. They are bringing those to their customers. So our footprint is expanding. And that's very important for the scalability of our business model. And we see this happening especially with the customers we've been working with already for a few years.
So these repeat customers who are taking over that role more and more. So that's a process that will continue to expand our footprint.
Do you have a sense, you know, roughly today, of how many they are operating? I mean, you know, you've got 190 systems. Is it sort of-
Yeah.
Yeah, a few that they've got at the customer end today, or is it quite? Yeah, I'm trying to understand just how material it is versus the 190 .
Yeah. Yeah. It's, yeah, I have to think a little bit to give an exact number because sometimes we don't always know. But in the meantime, let's say it's more than ten. But I don't, I can't give you exact number because I really don't know. But I know of about 10 customers who are doing this.
Okay, fine. Then just another final one. In terms of your employee count, do we expect that to be, you know, roughly steady through the second half of this year? You know, you're moving to a new factory, you're obviously delivering, hoping to deliver a ramp-up in revenues in the second half. Just trying to understand, you know, when the headcount is likely to then move up. Is it 2025 plus, or are you going to have to add more people sooner?
Yeah. Yeah, so with the headcount we have now, we believe we're set up very well. I'm gonna make a distinction between the overhead sales commercial team, where we think we're set very well to facilitate the growth, and as you will see when we grow the volumes, we'll need to add staff in the production.
Okay. I think that's all I've got now. Thank you. I'll hand it back.
Thank you.
Okay, thank you.
Thank you. We will take our next questions from Fernand de Boer from Degroof Petercam. Your line is opened. Please go ahead. Mr. Fernand, your line is open. Please go ahead.
Ah, should be now, okay?
Yeah.
Yeah, apologies. So thank you for taking my questions. The first one, your plant is now operational, but I still saw that there is some EUR 18 million assets on the construction. Where is that related to? That's the first question. And then maybe also, could you give a little bit an idea on the depreciation level of CapEx in the second half of this year? And then the second one, your gross margin is still at around, let's say, 59%. Is this the level you could maintain also in the coming years? Because in my assumption, that would mean that you would be maybe already break-even EBITDA level next year. Could you give a little bit idea on that one? And maybe the last one, you scored a number of orders in the past few months.
Going forward, is it possible to give us an idea of your order book or order backlog? Thank you.
Maybe, coming to your first question about the assets in the construction, that is mainly related to the new factory, which will be in use in the second half of this year.
Okay. And then maybe something to say about depreciation charges in the second half, if the new plant is operational now?
The exact numbers, I don't know how much that will be, so I need to come back on that.
Okay, thank you.
And then going back to your question, the two other questions. So on the gross margin, the 59.1%, as Erik mentioned, also it's a very strong indicator for the appreciation of our technology. This is a level we believe is sustainable. We're always working to try to improve, but we will also, of course, be affected a little bit by product mix. But, so that's on the gross margin.
And, on your question on the backlog, or if I translate it to have better visibility of transparency on going forward, we are organizing this Capital Markets Day in April, where we will discuss and consider also taking the backlog and KPIs that we report.
Very good. Thank you very much.
Thank you. As a reminder, if you would like to ask question, please press star one on your telephone keypad. We will take our next questions from Kristof Samoy from KBC Securities. Your line is opened. Please go ahead.
Hello. Good morning, Christophe Samoy, KBC Securities. Just, regarding the outlook, and touching back upon the question of my colleague, could you shed some light on order intake during July and August perhaps? And, as a follow-up, can you also shed some light on your sales funnel or your commercial pipeline, how it looks compared to year-end or first half last year? And then, in terms of revenues, could you give some more color on the split between direct nanofiltration modules and other products you're selling? Thank you.
Yeah, thank you, Christophe. Good morning. Yes, so on the pipeline with each sales manager that we have added to the team, and the more experience they get, the more traction we get in the market. And when we follow the progress through the pilots, we also see that we're adding more pilots. We're building on the pipeline, and that's not only for this year but also for next year and the years thereafter. And when we look at that, we're really happy with the order entry that we see also after closing the first half year.
And we're looking back in the past, you will see that second half of the year is always has a higher revenue base than the first half of the year. So there's a bit of timing effect in there. And after we close the first half year, the whole team, of course, is dedicated to delivering the second half of the year, partly from backlog, partly from the projects that we still have to win, but that we are very clear for us and our customers, where we're going through all the steps to realize that. And so we're quite confident on that. And I forgot the second question. Could you repeat that?
Yes, yes. Yeah, if you could shed some light on the split of your revenues between nanofiltration modules and other products you're selling.
Yeah. Yeah, sorry. Yeah, thank you for repeating. Yeah, so that's a KPI we do not disclose, but that's also something that we're considering at Capital Markets Day to give a better understanding. We disclosed the order we got from Thermax in June from India, multinational OEM working from India, that we also have done this business both with the nanofiltration membranes and the ultrafiltration membranes. But we don't share the exact numbers on that.
Mm-hmm. Yeah, maybe then as a follow-up, I recall from the call of the full year results 2023, that you were still waiting for some accreditation and validation of your technology in certain regions. Has anything material changed there over the past few months? Can you detail that a little bit more, perhaps?
Yes. Yes, that's correct, so we have the accreditations or drinking water licenses and drinking water approvals for the major markets. The biggest one in the world is the NSF. That's the U.S.-based standard, and some specific markets we are continuously working on. For instance, in France, we've made strong progress now with drinking water approvals, and we're also considering some other regions that we believe will be important markets for us, but for the majority, it's all in place.
Okay. And then as I also recall that when you look at the regional breakdown of your revenues, we see a sizable share in Asia. But I presume, or is it correct to presume that not a lot of products or modules have been sold in China in the first year half?
. We've also saw some project in China, but I think the biggest ones were this first half year in India and Mexico w e shared also with you.
Indonesia.
And Indonesia. Thank you, Erik. But yeah, that's more timing issue than you cannot interpret that as a market trend.
But in your pipeline, do you see an increase of quotation requests or pilot requests for the Chinese market?
Absolutely. Absolutely. So I would say across the world, we see that, but also in China, definitely. Yeah.
Okay. Thank you. That's all for now.
Thank you for questioning.
Thank you. We will take our next questions from Christoph Greulich from Berenberg. Your line is open. Please go ahead.
Good morning, and thanks, sir, for taking my questions. You had a statement in your prepared remarks regarding the strong progress that you've made with several key OEMs, and yeah, you mentioned four of them by name. So I think for two of them, for Aqualia and Nijhuis Saur, there have been some press releases over the last twelve months or so. But I think for Veolia and Suez, that there hasn't been much announced in recent past. So if you could just provide a bit more color, like, what exactly that strong progress is that you have done with them, and what type of pilots or demos you are running with them.
And then a second question would be on the CapEx outlook. If you just could give us an idea what to still expect in terms of CapEx now that the new plant is successfully started up. What to expect in H2 and then for the coming years, the normalized level of CapEx that you expect. Thank you.
Yeah, I'm going to cover it. I will start with the CapEx. So if you take as of June 2024, approximately 90% of the CapEx is related to our new factory, which is recorded under the property plant and equipment. The remaining CapEx is expected to be recognized in the second half of this year and in the first half year of 2025. And then looking ahead after these years, then we will move, let's say, to a level which is in line, let's say, with the industrial standards. So that's, that means, let's say we move to a normal level of capital expenditure after 2025.
Yeah. And then going to your question about the progress we're making in Europe with these big OEMs. So the progress is very much in the number of pilots we're doing with them, working towards real projects, as well as. And you must also realize these are big organizations, as working on the technology acceptance within such an organization. So that takes a bit of time sometimes. But when we say strong progress, we mean we're going through those processes together with these key customers, which is also a very natural process. By the way, of course, we're going through that with every customer where we first have to get the technology accepted and approved, and then work with them towards real projects.
What we see is that we see more and more that they're willing to apply our products. When we can communicate about these real projects, we will do so.
Great. Thanks a lot for that.
Okay.
Thank you. As a final reminder, if you would like to ask a question, please press star one on your telephone keypad. It appears there are no further questions, so I will hand back to Michiel for any additional or closing remarks. Please go ahead, sir.
Yeah, thank you and thank everybody for joining our call and for your presence and attention and questions. We look very much forward to briefing you again on the progress on the results on the full year 2024, and of course, we'll announce our capital markets day ex date as soon as we can to you. Thank everybody for participating, and have a good day.
Thank you.
Thank you.
This concludes today's call. Thank you for your participation. You may now disconnect.